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On economics, Davos, and the #buyfromthebush campaign

News from the front desk, Issue 465: Economics, for all its connection to the human psyche, is sometimes gobsmackingly harsh and cold (No surprise to anyone).

Heard on the radio on Thursday morning a real estate agent saying that the housing market in Batemans Bay, a place badly smashed by the Australia Fires, would likely experience a mini boom.

It’s a simple equation of demand and supply, she said. For those who insured, that’s fine. People will want to rebuild as quickly as possible and the lack of housing will push up rental and sale prices alike. This won’t help those who are not insured and have no capital resources to call on, she added.

On Thursday we posted an article from Four Twenty Seven, the climate rating service bought by Moody’s late last year.

The authors say this is what happened in California after their dreadful wildfires: the wealthy areas were soon rebuilt and the community restored. In poor areas, this did not happen.

After five per cent of Santa Rosa’s housing stock burned in 2017, “the city experienced an increase in property prices and rents following the fire: displaced households needed new dwellings, construction workers and emergency relief officials needed housing and amenities, and local businesses found new clientele.”

Rebuilding has occurred more rapidly than expected because most people were insured and could afford to rebuild.

The city experienced a mini-economic boom due to construction.

“In contrast, the city of Paradise went from 26,000 residents before the Camp Fire down to 2000. More than one year later, only a handful of houses have been rebuilt, and many residents struggle with whether they should move back.”

In Paradise, there was little to no insurance.

The risks of the displaced

What happens to those displaced uninsured people in the firegrounds of Australia – including businesses that have closed and may not be able to claim support because they have not lost a house – is still a scary unknown.

What is known is that they will have a negative economic impact, possibly $100 billion, according to some estimates.

Also known is that the economic risks overall of climate are starting to sink in. (To everyone except our prime minister it seems, who is intent on supporting one small industry of 38,000 workers to the detriment of the rest of workers numbering nearly 13 million. Go figure.)

These risks are so increasingly apparent that all major financial ratings agencies are buying up capacity on this score – not just Moody’s.

In September global index company MSCI bought Carbon Delta, a boutique focusing on climate risk analysis and S&P at the end of last year made a move for sustainable index player RobecoSAM.

Perhaps they’re all getting set to issue warnings to corporates and governments about their financial stability, like Moody’s did this week to the NSW government, because of drought and bushfires.

Davos tells it like it is

At Davos, Wendy Frew finds in her article this week, the World Economic Forum contained a slew of warnings that Australian governments and companies should be paying heed to. Most important is that 2050 is far too late to achieve a net-zero economy.

“We cannot get to 2030 and still have this conversation,” said board member of oil and gas producer, Saudi Aramco, Andrew Liveris.

Bank of England governor Mark Carney warned companies they faced extinction if they didn’t transition to a green economy, saying there was a “fundamental reshaping of the system” under way.

Andrew Petersen chief executive officer of the Business Council for Sustainable Development Australia shared more detail of global action in the BCSD Australia’s first webinar of the year for members, which also included a contribution from The Fifth Estate. You can hear the recording of this here.

ACOSS the bold

With all these warnings, of human, ecological and economic impact, it’s a pleasant jolt of surprise to see the Australian Council of Social Services call on the federal government to stand up like an adult and do what we pay governments to do: step in where markets fail and act with confidence and skill to deal with our challenges.

The call is not soft and meek, it’s bold. ACOSS wants a massive $16 billion in spending on people affected by drought, on climate impacts, on the unemployed, on housing, the aged and for mental health.

It would add an instant stimulus, not just to the people and areas affected, but to the economy as well.

This is the same economy that fails to respond to tax cuts for people who least need a spending stimulus (strange), and the same economy that fails to respond to interest rate cuts because these typically do little more than pump up an already over inflated asset bubble. (Meanwhile, our kids can’t afford even a home of their own from which to ponder the mess we are making of all our futures.)

Listen to ACOSS, Mr Treasurer. Bring it on.

The Green List is back

On the topic of the positive side of economics, and after a slightly longer hiatus than we permit ourselves at The Fifth Estate, The Green List is bounding back with a bunch of new members who will be introduced from next week.

This directory/magazine is designed precisely to foster the commercial opportunities emerging in the green and climate economy.

In our first newsletter, which you can see in its entirety here, we focus on the amazing Grace Brennan, a country woman who decided to turn the tragedy of the unrelenting drought in our midst to something positive with her #buyfromthebush campaign.

In a fitting tribute to the resilience of this country, Brennan focuses on the commercial opportunities of using our spending power to buy goods and services, directly from the “producers, artists, artisans and retailers in rural and regional Australia at a time when, arguably, the bush has never needed more help.”

Not charity, but transactions with purpose and meaning.

In its first six weeks, Brennan’s campaign generated “$2.6 million worth of revenue for featured businesses, created 25 jobs in rural communities because of increased sales, while more than $320,000 was spent at Australia Post’s regional franchises. And that was all before the Christmas rush.”

Brennan likes to talk about deepening connections to the bush. Thing is that, like it or not, we are becoming more connected to the bush on a daily basis. The prices of fruit and veg from the shops are the brutal consequences. So do the searing images of fires destroying the places most loved by so many city folks hungry for their regular escape to nature.

The message from Davos is clear, the messages from the COP at Madrid are clear. Every day the warnings are growing more intense.

If we can’t shift the political mountain we need to grapple with climate heating – if the emotional challenge is too great – then maybe we can stick to cool, unemotional commerce and finance.

Economics got us here; let’s use it to get us out.

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